Accra, March 7, GNA - Mr David Adom, a tax consultant, has asked administrators to consider exempting companies, which show a high commitment to their tax obligations from the payment of "Withholding Tax".
He said although the idea of instituting the Withholding Tax was to ensure that companies met their tax responsibilities, there was strong evidence that keeping such monies had a negative impact on the cash flow of companies.
Besides it also leads to the overpayment of taxes by some of the companies, which the administrators sometimes found difficult to return willingly.
Mr Adom was speaking at a lecture on the Effects of Tax Measures in the 2006 Budget and the Taxation of Conglomerates, organised by the German Development Cooperation and the Institute of Economic Affairs in Accra on Tuesday.
While emphasising that the main objective of tax was to provide revenue for government through direct and indirect sources, Mr Adom warned that the tax system should be as neutral as possible to minimize interference on market forces in the allocation process. He said the many tax policies in the 2006 budget, which included the enhancement of industry concession; tax exemptions on capital gain and reduction in corporate tax among others were to free capital and encourage companies to contribute to the venture capital fund. Mr Harry Owusu, Executive Secretary of the Revenue Agencies Governing Board, said tax revenue effort over the past few years had shown significant improvement through efficiency in the administration of collection and enhanced revenue measures.
Tax revenue as a percentage of GDP rose consistently from 16.3 per cent in 2000 to 24 percent in 2005.
Mr Owusu said the 2006 budget provided for a reduction in corporate income tax as a way to stimulate and improve domestic investment. There was also a further reduction in the National Reconstruction Levy to free more resources for the business community and to finally eliminate it in 2007.
Professor Norbert Herzig, Director of the German Department of Business Administration and Taxation, who spoke on Group Taxation regimes, said they are important investment incentive for companies. He said most of the system worldwide taxed groups of legally independent companies as separate entities and this; he said did not encourage the building of groups.
Mr Herzig said countries had now seen the need for special treatment for such groups of companies through the provision of group taxation regimes.
Group taxation tries to reflect the economic effects of building a group by provision loss relief within a group of companies. Mr Joachim Schmitt, Counsellor Development Cooperation of the German Embassy, who shared the experiences of Germany on Tax amnesty said that although it was aimed at enhancing the attractiveness of the capital market and increasing the inflow of foreign investment as well as ensuring voluntary future compliance, it had shown that actual success fell far short of expectations.
This, he said was because of lack of confidence by the citizens in their own tax and penal system and others holding on to the status quo.